Credit plays an important role in fields such as finance, consumption, education, and social interaction. Credit scoring systems are very common in our daily lives. For example, shared charging treasures can use credit scores to enjoy deposit-free services, Taobao’s higher credit scores can enjoy fast refund services, and banks’ credit scores can be used to evaluate whether they can enjoy large loans. These behaviors all need to be endorsed with credit scores.

So where does credit data come from? In fact, all data are credit data, including loan amount, educational background, professional income, email, phone number and address, and even consumption habits, hobbies, etc., which can be collected through big data and used as credit data to evaluate individuals. credit score. In addition to enjoying some additional services, the credit score can also be used as the basis for judging whether the user has the ability to repay the loan.

In addition to personal credit scores, some large institutions, shops, products, etc. also have credit scores. They can generate credit scores based on user reviews, product sales, store reputation, etc., and use them as a basis for trustworthiness (lending).

In the Web3 world, financial scenarios, social behaviors, and transaction methods have undergone tremendous changes. In addition, DeFi has also redefined the global financial industry, and it has brought obvious advantages in terms of financial inclusion and access, payment speed and elasticity. With the high adoption of DeFi, the credit scoring system is also a crucial link. However, data such as personal assets and transactions participating in DeFi are recorded on the chain, while traditional financial, credit score, and bank evaluation data are off-chain. How to realize on-chain and off-chain data interaction, securely transmit real-world data to the blockchain, and create a comprehensive credit system for DeFi is one of the problems that need to be solved urgently.

Based on this, on-chain credit scoring systems such as Reputation DAO are constantly emerging and developing.

Reputation DAO is a bridge between DeFi and traditional finance, enabling individuals to leverage their real-world financial data and identities when interacting with smart contracts. It unlocks a wider range of use cases in DeFi by analyzing specific data from on-chain accounts, oracles, and DAOs with the help of a powerful dataflow engine.

It was launched by Australian blockchain platform Mycelium, whose last product was Tracer DAO, a derivatives ecosystem deployed on Arbitrum, with a current total transaction volume of $137,154,334.

Reputation DAO recently announced the completion of a $4.75 million seed round of financing, with participation from DACM, AirTree Ventures, Koji Capital, and Framework Ventures. Chainlink co-founder Sergey Nazarov has also joined the Reputation DAO as an advisor.

DeFi lending is still in its infancy

In recent years, DeFi has been in a stage of brutal growth, with new products emerging one after another, and more and more investors and funds pouring into the DeFi market. As the product is constantly updated and iterated, its product architecture and yield are also becoming more mature and stable. Investors are not limited to the demand of liquidity mining, but involve lending, algorithmic stable currency, portfolio investment and other products that can obtain diversified income.

According to DefiLlama data, as of now, the total locked value of DeFi is $211B, and the lending agreement accounts for 23.69% of the total TVL, with a total of 140 projects, ranking second. Number one is the decentralized exchange.

Compared with this achievement, the DeFi lending market structure has not yet matured. It is manifested in the fact that DeFi's data integration capabilities are still relatively weak, lack of a credit scoring system, and cannot widely extend the credit chain, so that the phenomenon of over-collateralized loans (and the accompanying low capital efficiency) still exists.

secondary title

How does Reputation DAO work?

Specifically, Reputation DAO will collect and analyze credit data in the following ways.

1. Scan and connect

Using Reputation DAO, DeFi users can scan and check the security of the underlying oracle data in their smart contracts. By building a data aggregation pipeline, any EVM-based data can be quickly transferred. With credit links, users can learn about the oracle's performance and gain insights into specific data feeds. Reputation DAO focuses on scanning data for personal DeFi accounts, oracles, and DAOs.

A decentralized oracle network powered by Chainlink is then used to connect required off-chain credit services such as identity services, relevant AML/KYC checks, FICO/Vantage scores and relevant social media data.

2. Analysis and calculation

Once the data is obtained, Reputation DAO will analyze and sort the scanned data related to individual accounts, oracles, and the DAO. Reputation DAO has developed RepScores, a reputation scoring algorithm that uses on-chain data sources. Integrating RepScores into contracts can reduce collateral requirements for individuals in DeFi.

3. Visualization

secondary title

The first product of Reputation DAO - Oracle Reputation

Reputation DAO will create different platforms and applications to gain credit for serving the open blockchain ecosystem. The first product is Oracle Reputation. Oracle Reputation turns on-chain information about oracle quality into knowledge that humans (and machines) can use to make decisions. Oracle Reputation uses the Repscore model to attach human-readable and programmable knowledge into Web3 by coordinating and aggregating credit metrics.

Data analytics for oracles, contracts, and integration agreements are currently available on Oracle Reputation.

1. Oracle

Oracle Reputation, for example, ranks oracles based on average deviation or total transaction volume submitted. These rankings give users an at-a-glance look at Oracle's reliability.

2. Contract

You can view the time when the oracle contract was submitted on the chain, the deviation between the oracle data and the real data, and the amount of ETH held by the oracle address.

3. Agreement

The Oracle Reputation V2 platform has been updated with a new feature - Protocol Visualization Environment (PVE), which can be used for DeFi protocols integrated with Reputation DAO. It is a widget that is displayed on the protocol frontend. When a user clicks on the widget, it directs them to the agreement's data dashboard in Oracle Reputation, where you can view data related to the agreement.

Currently, Oracle Reputation has integrated Aave, Tracer DAO, Arbitrum and DeFi Safety. Users can view the data security of the oracle machine of a specific protocol according to their needs.

For example, it provides Aave with the following data:

• Aave contracts read prices and times from Chainlink, as well as price updates from individual oracles and networks of oracles.

• Daily and hourly TVL, expected gas and gas paid, and the size and amount of borrowing.

• An overview of all the data sources Chainlink uses on its platform, including a log of recent transactions.

• The Reputation Widget displays the end-to-end data supply chain for each Aave contract. Aave users can more clearly understand how oracles and Chainlink contracts interact with smart contracts on the Aave protocol.

• Make it easier for users to perform due diligence and give users peace of mind when transacting on the Aave network. This helps users build trust in the protocol.

Reputation DAO future development path

Reputation DAO is under development:

1. Repscore——Oracle credit scoring model

Repscores uses the open-source Relative Performance Ranking (RPR) model to evaluate each oracle's performance and generate a "credit score" from 1 to 100. This model will provide a standard framework for comprehensively evaluating and measuring oracle performance.

2. Monitoring and alerting of oracles

This feature enables immediate notification when an oracle fails. Users will be able to choose when they are notified and how they receive notifications.

Richard Galvin, co-founder and CEO of Capital DACM, said: "Credit scoring is a key function of banks and external providers in the traditional financial system. So far, for borrowers and lenders, this clarity has not been DeFi. functionality. As the ecosystem matures and independent, reliable information DAOs emerge, we see Reputation DAOs as the infrastructure for the industry’s next growth phase.”

Indeed, the interoperability between DeFi and traditional finance can provide trillions of dollars in capital and billions of user flows, and the credit system is an integral part of it. Reputation DAO provides a conduit for this data to flow into smart contracts, along with increased security, interest rates, and guarantees.